In today’s modern society, it is becoming even more important than ever to plan for your family’s financial future. Estate law is a complex and often frustrating part of our society, relying on numerous factors to create a unified code of regulations that can help or hamper the security of your estate. One way to minimize errors and stress is to seek out a qualified team of estate planning attorneys. While we specialize in everything from criminal litigation to wills and probate, our estate lawyers in Maryland place a focused emphasis on comprehensive planning of your estate. JDKatz was founded to provide quality services to Bethesda, Washington, D.C., and beyond. We’re here and ready to provide a wide range of support for your unique needs, from tax advice to business structuring and beyond. Our Bethesda attorneys strive to help our clients in any way we can.

One way we help is through our regular blog series. Today, we’ll continue to highlight uncommon estate planning tips that may provide major improvements for your estate while minimizing your tax liability. These strategies are not normally used, but when utilized in the right situation, can provide major benefits. Learn more below, then be sure to reach out to our legal team for the best assistance and planning for your future.

Estate Planning Protection in the Digital World

One interesting aspect of estate planning that is now more problematic than ever is protecting your digitally stored information and accounts once you are gone. In many states, the law dictates that digital assets are non-transferable upon death unless provisions are in place to allow access. It’s essential to appoint a fiduciary and give them access to your online assets to ensure that your digital estate is accounted for and safe from theft.

Failing to appoint an individual for your assets can lead to a lot of red tape for your family members when trying to distribute your estate accordingly. Whether this includes your social media account or online banking institution, a lack of access can lead to serious problems. In some cases, your assets may simply become lost. Digital security is also essential in estate planning, as online theft has been increasing over the years. If someone were to hack your accounts after your passing, major financial information can be compromised. Without proper access, your family may never find this problem, leading to future complications for everyone!

Cash Balance Options for Aging Professionals

One unique situation that can result in widespread problems results from wealthier clients who find themselves short on their retirement accounts resulting from a major life event. In many cases, this involves high-income individuals such as business owners or doctors who are dealing with the financial fallout of a recent divorce. If you are over the age of 50, you may qualify for a cash balance plan to help restore your lost assets.

The primary benefit of this strategy is to avoid the contribution limits set for retirement accounts. Cash balance plans are typically employer-sponsored, allowing you to put roughly two to two and a half times the maximum allowed amount into your 401(k). This helps to rebuild your retirement savings while also providing you with serious tax deductions come tax season!

Placing Extra Retirement Assets in a Roth Account

One strategy for those looking to save more for retirement is placing money post-tax into a 401(k) with the intent of utilizing tax-free earnings in the future. As our previous section highlighted, people over the age of 50 can place up to $20,000 into their account tax-deferred, while individuals under 50 can match up to $18,000 for the same reason. Remember that you can go beyond this limit on certain 401(k) plans if you pay for the taxes up front.

The benefit of this after-tax approach is that many plans allow you to convert your savings into an internal Roth account. From here, any earnings on your investment would be tax-free, leading to long-term benefits in terms of tax-free retirement assets. It’s important to make this conversion as soon as possible after making your taxed contributions in order to prevent any taxes on the conversion itself.

Enacting Tax Shelters for Spousal Benefits

Also known as bypass trusts, credit shelter trusts are a useful vehicle for married couples with considerable wealth. This approach is beneficial for giving the surviving spouse access to income assets and the principal of the trust without adding this extra income to the survivor’s tax liability. A tax shelter can be very helpful in minimizing tax rates on your trust’s income, as some parties have been hit with total tax rates over 43 percent!

Enacting a spray power can be even more beneficial for surviving spouses who want to avoid the top tax rate on their income who do not really need the additional capital. A spray power allows the trustee in your estate plan to distribute this income more freely, including children in need.

When all is said and done, estate law can provide major opportunities for those who plan accordingly. Conversely, estate law can also be a complex labyrinth of rules and if/then’s. If you are in need of assistance in planning for the continuation of your estate once you pass, our Bethesda estate planning attorneys are here to help. JDKatz is proud to be your trusted team of estate lawyers in Maryland, delivering comprehensive support to optimize the outcome for your unique needs. Contact us today to see how we can help!

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